Medi-Cal Rx - California

1 1 Medi-Cal RxTransitioning Medi-Cal Pharmacy Services from Managed Care to Fee-For-ServiceFebruary 20, 2020, 4:00 5:00 K Street, Sacramento, California2 Today s Agenda Welcome & Opening Remarks Project Recap Project Implementation Updates & Project Timeline Fiscal Update & Overview Stakeholder Engagement Update Question & Answer Session3 Project Recap 1 Pursuant to Governor s Executive Order N-01-19, Medi-Cal Rx refers to the suite of Medi-Cal pharmacy benefits and services that will be standardized and administered through the fee-for-service (FFS) delivery system, beginning on January 1, 2021. Medi-Cal Rx will impactall Medi-Cal Managed Care Plans (MCPs), including Senior Care Action Network (SCAN) and AIDS Healthcare Foundation. Medi-Cal Rx will notapply to Programs of All-Inclusive Care for the Elderly (PACE) and Cal MediConnecthealth plans.

2 4 Project Recap 2 Transitioning pharmacy services from Medi-Cal managed care to FFS will, among other things:oStandardize the Medi-Cal pharmacy benefit statewide, under one delivery access to pharmacy services with a pharmacy network that includes the vast majority of the state s pharmacies and is generally more expansive than individual Medi-Cal managed care plan pharmacy statewide utilization management protocols to all outpatient drugs, as California s ability to negotiate state supplemental drug rebates with drug manufacturers as the largest Medicaid program in the state with approximately 13 million Recap 3 Medi-Cal Rx will include all pharmacy services billed on pharmacy claims, including but not limited to: outpatient drugs (prescription and over-the counter); enteral nutrition products; and medical supplies.

3 Medi-Cal Rx will not include pharmacy services billed on medical/institutional claims. Medi-Cal Rx will not change:oThe scope of the existing Medi-Cal pharmacy benefitoProvision of pharmacy services in an inpatient or long-term care setting, regardless of delivery systemoExisting Medi-Cal managed care pharmacy carve-outs ( , blood factor, HIV/AIDS drugs, antipsychotics, or drugs used to treat substance use disorder)oThe State Fair Hearing process6 Project Implementation Updates August 22, 2019: DHCS released Request for Proposal (RFP) #19-96125, for the takeover, operation, and eventual turnover of administration of Medi-Cal Rx. November 7, 2019: DHCS released a Notice of Intent to Award. December 12, 2019: DHCS awarded an administrative services contract to Magellan Medicaid Administration, Inc. (Magellan), with a contract effective date of December 20, 2019.

4 December 2019 & Ongoing: DHCS, in collaboration with the Medi-Cal Rx Contractor, Magellan, has undertaken transition and implementation activities, including claims administration, rebates administration, education and outreach to Medi-Cal providers and beneficiaries, Implementation Updates 2 As part of DHCS requirement gathering sessions toinform Medi-Cal Rx implementation, DHCS continuesto explore options for policy changes in the followingareas for go-live:oCreating policy to allow multi-year priorauthorizations (PA).oImplementing enhanced and/or expanded auto-adjudication functionalities related to PA. DHCS will also be working closely with Magellan toexplore options for post-go-live policy changes in thefollowing areas:oEnhancing existing opioid management pharmacy lock-in Timeline9 Project Timeline Legend Requirements Gathering & Validation: DHCS and Magellan identification and agreement on details of all contract requirements, , pharmacy claims pricing, rebate invoice production, and customer service center response time requirements.

5 Stage 1 Testing: Magellan sets up testing environment, including all necessary test files, test data, test scripts, facilities, equipment, hardware, and software. Magellan runs preliminary test scenarios. Stage 2 Testing: Magellan tests full pharmacy claims administration and rebate processing systems, which includes parallel system tests to compare and validate against legacy processes, and validation of business recovery Timeline Legend 2 Stage 3 Testing: With direct oversight from DHCS, Magellanconducts additional parallel tests, as well as volume and stresstesting to validate that all system and business processes aresufficient for size, nature, and scope of Medi-Cal Rx. Provider Training: Magellan, in consultation with DHCS,prepares all affected Medi-Cal providers, including but notlimited to, pharmacies, prescribing physicians, managed careplans, behavioral/mental health providers, countyproviders/partners, and Tribal health programs, for thetransition to Medi-Cal Rx.

6 Post-AOO Monitoring & Takeover closeout : DHCS, incollaboration with Magellan, will ensure all contractrequirements are met, including but not limited to claimsprocessing, rebates administration, provider payments,customer service center performance, etc. This will also includemonitoring and evaluating the 90-day transition Update & Overview 112 Fiscal Update & Overview 2 Estimated General Fund (GF) savings of ~$405 million by 2022-23 related to the pharmacy carve-out, which is subject to a variety of variables and assumptions impacting the net cost to the state, which include, but are not limited to:oAn increase in supplemental rebates by 2022-23 due to DHCS enhanced bargaining power as a result of the increased number of beneficiaries obtaining their medications through the FFS benefit (~ to13 million)oImplementation of Maximum Allowable Ingredient Costs (MAICs) for drugs which have 3 or more generically equivalent options availableoReduction of costs related to administrative functions of multiple Pharmacy Benefit Managers (PBMs) used by various MCPsoFiscal is based on current Medi-Cal FFS reimbursement methodology, which includes $ $ dispensing fees.

7 13 Fiscal Update & Overview 3 DHCS is proposing a new supplemental payment pool of $105 million Total Fund (TF) ($ million GF) annually for non-hospital 340B clinics as a part of the Budget. This program would become effective with the Medi-Cal Rx transition date of January 1, 2021. The $105 million is an aggregate total based on self reported data by non hospital 340B clinics (Revenue Total Reported Expenses).14 Fiscal Update & Overview 4 Proposed Trailer Bill language would: oRepeal the six prescription drug limit, and is estimated to be cost neutral, if the Medi-Cal FFS prescription co-pays, is estimated to be cost neutral, if a best pricing schedule for Medi-Cal drugs that would allow for drug prices outside the United States to be considered, and the fiscal impact is to be determined .15 Stakeholder Engagement As part of DHCS revamped approach to Medi-Cal Rx stakeholder engagement, in addition to this continuingMedi-Cal Rx Public Forumthroughout 2020, DHCS also continues to:oHost a dedicated Managed Care Workgroup for Medi-Cal Managed Care Plan Medi-Cal Rx updates at various other DHCS meetings and forums, including but not limited to the Medi-Cal Drug Utilization Review Board, Medical Directors Meeting, Pharmacy Directors Meeting, California Children s Services Advisory Group, and tribal consultations with tribal health programs.

8 16 Stakeholder Engagement 2 As another component of DHCS revamped approach toMedi-Cal Rx stakeholder engagement, DHCS alsolaunched the Medi-Cal Rx Advisory Workgroup on January14, 2020. This was the first of seven in-person meetingswhere DHCS provided and will continue to provide statusand implementation updates on the pharmacy transition, aswell as lead targeted discussions regarding topics such as:oRoles and responsibilities between DHCS, the Medi-CalRx Contractor, and Medi-Cal Managed Care PlansoDHCS implementation strategies, tools, and timelines,including but not limited to, provider education andoutreach and beneficiary notificationsoMedi-Cal pharmacy policy development andconsiderations, which will include the scope of carveout, prior authorization, and utilization managementprotocolsoChanges to existing Medi-Cal pharmacy committees17 Helpful Resources For more information about Medi-Cal Rx, please visit DHCS dedicated Medi-Cal Rx website: Medi-Cal Rx.

9 Transition Medi-Cal Rx Frequently Asked Questions (FAQs) - additional guidance and clarification to Medi-Cal beneficiaries, providers, plan partners, and other interested parties For questions and/or comments regarding Medi-Cal Rx, DHCS invites stakeholders to submit those via email to